Rural Watch

Week beginning September 14, 2009
Monday, 14 September 2009

Rural Watch

Week beginning September 14, 2009


Exchange rates have continued to place pressure on overseas prices, with the New Zealand Dollar hitting 70c against the US Dollar and 42p against the Great British Pound last week. This has lowered returns for the cheaper lamb cuts into Asia and the Pacific. European prices are mostly unchanged while negotiations for the new season are underway.

At this time over the past three years, domestic UK lamb prices have been around 40% above New Zealand schedule prices. With the current prices at 316 pence/kg, UK prices remain relatively high, but this price is only 22% above New Zealand schedules. This may add pressure to the new season contracts, although continued low supply will help to offset this effect.

There has been little movement in prime lamb prices at the sales last week, with continued demand keeping prices up in the South Island around $118 for a medium prime lamb. In the North Island prices remain stable at around $110. Meat processing company schedule prices however, are steady to down 5c/kg in the North Island and steady to down 10c/kg in the South.


With the New Zealand cow kill heading towards the middle of its traditional low volume period, it has provided a small window of opportunity for exporters to squeeze some extra value out of US imported prices. US imported cow has gained a hefty US4c/lb to US132c/lb and imported bull climbed a further US1c/lb to US141c/lb.

The lift in imported prices was also bolstered by some US buyers looking to cover short term needs and the continuing trend of the high US subsidised cow slaughter being masked by the low US general cattle slaughter.

However, both the US market and the Asian markets continue to show little interest in product. Hence, when the New Zealand slaughter has its small seasonal increase in November through to early December, US imported prices are likely to ease back.
Despite the lift in export prices, the heavy burden of the high New Zealand Dollar, which has sat above US67c for the past six weeks, has clipped between 2 and 4c/kg off the average New Zealand farmgate price for all categories of beef. The net value of a 300kg bull is currently $945/head in the South Island and $1020/head in the North Island.


After four weeks of solid gains, dairy commodities slowed up slightly last week, with the NZX Agrifax weighted average dairy commodity price only gaining US$20/tonne to reach US$3040/tonne.

Butter, anhydrous milkfat and casein were the only commodities to post gains, all up around two percent. Skimmilk powder, wholemilk powder (WMP) and cheddar took a break, all remaining flat on the previous week’s prices.

While all dairy commodities, except for WMP are below their five year average, the current WMP price is now two percent above its five year average price of US$2840/tonne.

The last time the NZX Agrifax weighted average dairy commodity price sat up above US$3000/tonne was in November 2008. It took around seven months to drop to its lowest point of $US2290/tonne. However, within two months of this low, the weighted average has already bounced back above the US$3000/tonne mark.


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